FX.co ★ Mexican Peso Loses Ground After US Tariff Threats

The Mexican peso weakened beyond 18.70 per USD, marking its lowest level since July, following its approach to a near one-year high earlier. This decline was triggered by President Trump’s recent announcement of potential 30% tariffs on Mexican and EU goods, in addition to the existing 35% duties on Canadian products. This development has reignited concerns about Mexico's export-dependent economy, with over 80% of its goods being shipped to the north, potentially facing challenges from retaliatory trade barriers. Concurrently, the US dollar strengthened, supported by robust demand during recent auctions of 10- and 30-year Treasury bonds, as well as renewed discussions concerning Fed Chair Powell’s position, which attracted investors towards the US currency, exerting additional pressure on emerging-market currencies. Domestically, the minutes from the Bank of Mexico's June meeting disclosed that, after implementing a total of 325 basis points in rate cuts since early 2024, the bank now perceives limited capacity for aggressive easing. Instead, it prefers smaller, precautionary quarter-point adjustments, as inflation remains persistently above its target.